‘Eyewatering’: UKHospitality hits out at up to £2.9b zero-hours reform costs

The government’s proposed reforms to zero-hours shift and contracts have been forecasted to deliver direct costs to UK employers of between £350m and £2.9b a year.

The proposals, which include full payment for cancelled, curtailed or rescheduled shifts, a right to guaranteed hours and reasonable notice of shifts, are currently under consultation, due to close on 25 August.

Proposed changes to zero-hours contracts under the Employment Rights Act 2025 have not yet taken effect.

While the government has insisted it is “not banning zero hours contracts” its latest analysis, published to coincide with the ongoing consultation, has conceded that these reforms “will increase administrative costs and reduce flexibility for employers”.

The report continues: “This could make it harder for employers to respond to changes in demand, with potential knock-on impacts on output. The direct cost to employers of the reforms as a whole could be between £350m and £2.9b per year.

“This range of costs captures the minimum and maximum impacts for each measure based on the broad range of policy options considered, and does not capture the full range of expected benefits, as many of these are not possible to monetise.”

Chair of UKHospitality Kate Nicholls said: “The eyewatering cost of these reforms comes at the worst possible time for hospitality businesses, arriving on the heels of more than £5b in additional employment costs in the past two years.

“More than 100,000 jobs have already been lost in hospitality as a result and the extraordinarily high cost of employment continues to restrict job opportunities, particularly for young people. This is on top of hospitality being disproportionately hit by business rates and our high rate of VAT.

“The government should be incentivising employment in hospitality, as a sector that employs the most young people, most part-time workers and the most non-graduates.

“Instead, these reforms add yet more cost, at a scale that far outweighs the cost benefits for employees.

“It’s critical the government works with sectors like hospitality to reduce the cost of employing people and incentivise employment, rather than increasing costs and risking further lost job opportunities.”

Image: Shutterstock/Anna Stills